NFL, Broadcast Networks Close to Eight-Year TV Deal Extension (Report)

Green Bay NFL - H 2011
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Green Bay NFL - H 2011

New arrangements with CBS, NBC and Fox could earn the league about $3.2 billion per year, with one analyst warning of a 2014 earnings "headwind" for their owners.

NEW YORK - The NFL is close to signing an eight-year extension of TV rights deals to 2021 with broadcast partners CBS, Fox and NBC that would earn it about $3.2 billion a year, a 60 percent increase over the current contract, the Wall Street Journal reported.

Plus, previous deals with Walt Disney's ESPN and satellite TV giant DirecTV are expected to seal average media fees of about $6 billion for the league.

The NFL declined comment, the Journal said.

"No one on the broadcast end wants to be without the NFL," Lee Berke, owner and analyst at LHB Sports, Entertainment & Media, told the Journal. "They go without it at their own peril, and all of that gets factored in when deciding to bid so high."

"The NFL is also expected to hold back some additional games to create another eight-week package earlier in the season on Thursday nights to be sold to cable networks," Nomura Securities analyst Michael Nathanson said in a report Tuesday morning. "We expect Time Warner’s Turner Networks, Comcast/NBCUniversal’s newly branded NBC Sports Network (formerly Versus) and News Corp.’s cable networks to all bid aggressively for this package."

Nathanson calculates a 6 percent-7 percent compound annual growth rate in fees for the broadcast networks over the life of the expected new deals "and an initial step-up in 2014 of 20 percent-25 percent, or between $150 million and $175 million." The first-year step-ups in costs "equate to a negative mid-single-digit earnings per share headwind for CBS and low-single-digit headwinds for News Corp. and Comcast," the analyst highlighted.

He also cautioned: "While we think the Street has long modeled the benefits of retransmission [consent fees], we believe that most models have ignored the pending step-up to 2014 programming costs."

The new NFL deal appears to allow TV Everywhere rights for networks, which could help boost retransmission fees later in the deal, according to Nathanson.

His earnings model for News Corp. already includes $190 million in total retrans revenue in fiscal year 2012, $400 million in fiscal 2013 and $600 million in the following year. For CBS, he projects $300 million in 2012 and $345 million in 2013, which Nathanson said could prove conservative.


Twitter: @georgszalai